Cannabis comes out of the basement and into big business
Coloradans don't have to ingest pot to enjoy the industry's benefits
Colorado was one of 10 states to lessen penalties for marijuana possession in 1975, but major changes in our approach to cannabis truly began in 2000 with the legalization of medical marijuana. That relationship changed dramatically yet again with the passage of Amendment 64 in 2012 which legalized the sale and possession of cannabis for recreational use. As a result, Colorado saw its first adult-use dispensaries open in 2014.
Today, Colorado has a front-row seat to witness the birth of a multi-billion dollar industry. To continue to grow, those of us in the industry have an obligation to both our customers and to our fellow citizens to produce and sell product that is safe, of unimpeachable quality and made available only to those who are of age and educated to use the product responsibly. Here are just a few of the many tangible benefits Colorado enjoys through a strong and responsible cannabis industry.
Better, Safer Product
Let’s be honest: marijuana did not first become available in Colorado with the passage of Amendment 20 in November of 2000. I’m sure parents around the state can relate to the fact that all sorts of illegal substances were easily available to my children during their years in the Colorado public school system.
A parallel can easily be drawn to Prohibition, as beverage alcohol was available despite its illegality. Yet there was no way to ensure the product was of high quality — or even safe to consume — or to regulate irresponsible sales or consumption because it was an illegal, unregulated industry. When Prohibition was repealed with the passage of the 21st Amendment to the Constitution, states were granted the right to regulate the production, sale and consumption of beer, wine and spirits. For all of alcohol’s negative impacts on society, no one would argue that the situation would be improved by a return to Prohibition.
Today’s cannabis market is remarkably similar. A consumer who chooses to purchase marijuana on the black market — or who did so prior to legalization — has no way to know if the product is high-quality or fresh, if they’re getting the strain being offered, who profits from the money they spend or, perhaps most importantly, if it was grown in a safe environment free from chemicals or contaminants. If there is an issue, that consumer has no recourse through a regulatory agency as they do in the legal market.
Legal, licensed growing operations that comply with the law are inspected frequently and must adhere to strict quality, safety, traceability, and compliance regulations. Responsible members of this burgeoning industry support appropriate safeguards and must comply in order to remain in operation. That is why we believe these strict regulations must be applied equally across the industry, especially to caregiver grows, which currently operate essentially free from the regulations that licensed grow operations must follow.
The cannabis industry is providing benefits even to those who choose not to consume our product. Last year, Colorado collected nearly $100 million in taxes, and that number is expected to grow. This money benefits many Colorado citizens through programs that include school construction, youth mentoring services, substance addiction support and counseling and police training. It probably goes without saying that illegal marijuana sales do not make such positive contributions to Colorado’s tax coffers.
Further, the industry is providing thousands of jobs at a variety of levels. According to the Colorado Department of Revenue, to date nearly 27,000 individuals have received their MED badges to work in the industry. . This includes jobs directly related to growing and selling cannabis, edibles and other products, but does not include the countless jobs created by the ancillary businesses supporting the industry through specialized products and services designed specifically for legal cannabis companies. These jobs contribute revenue through state and federal income taxes — over and above the sales taxes noted above — as well as through payroll taxes and the many other contributions these employees make to our economy by purchasing goods and services in our state.
It’s also important to point out many of our employees choose not to consume marijuana — just as many people employed by Colorado’s craft beer industry choose not to consume alcohol. That choice does not stop them from enjoying a good job and, at least in the case of our company, one that comes with higher-than-industry-average pay, 100 percent employer-paid health insurance, and a 401k plan.
Thanks to a little-known portion of the tax code, many outside of our industry don’t realize that companies who grow and sell cannabis pay a far greater portion of their total income in federal taxes than most other businesses. Section 280E of the federal tax code prevents cannabis producers, processors and retailers from deducting expenses except for those considered a Cost of Goods Sold (COGS).
In plain language, this means that because we grow cannabis instead of apples or broccoli or some other crop, our industry is unable to deduct many expenses that are common to other industries. The end result is a far higher tax burden than most businesses carry – an effective tax rate of 80 percent is not uncommon.
The cannabis industry is also highly regulated. While we certainly support and even lead the industry in responsible cultivation, processing, sale and use, the regulation in our industry is so strict (and often confusing) that we have more than 40 people — nearly 10 percent of our total workforce — whose sole job is to ensure we’re compliant in how we grow, label and sell cannabis.
We wouldn’t need that many people, again, if we were growing something else. And remember, those salaries are not something we can deduct! Now, imagine you’re the owner of a small mom-and-pop operation with only 10 employees. Where do you find the resources to comply with, for example, the more than 141 new cannabis regulations promulgated in 2015 alone?
As with any new industry, entrepreneurs, regulators, law enforcement and consumers are continuing to find their way together. This sometimes causes problems, but over time, we remain convinced we will find the right balance of regulation along with the consumers’ right to responsibly consume marijuana for either recreational or medical use. It is our goal to continue to lead in this space and contribute to finding this responsible balance for our state’s newest industry.